The Philippines soared higher among Asia-Pacific’s top markets in real estate investment and development prospects, emerging among the top bets especially in the residential, office and retail property segments.
Based on Urban Land Institute (ULI) and PricewaterhouseCooper’s research “Emerging Trends in Real Estate 2014,” Manila ranked fourth among 23 regional markets graded based on investment prospects, next to Tokyo, Shanghai and Jakarta. Manila climbed in this ranking by eight notches from 12th place last year.
Manila likewise moved a notch higher at eighth place in terms of development prospects, compared to ninth place last year. The other top markets in development prospects were: 1. Jakarta 2. Tokyo 3. Shenzhen 4. Shanghai 5. Guangzhou 6. Beijing 7. China secondary cities.
John Fitzerald, chief executive of ULI Asia-Pacific, said during the presentation of the report Thursday night that Tokyo and Manila were “big movers” in this year’s survey.
“The Philippines is drawing a lot of mentions this year within our report and there’s a perceived real turnaround in momentum here, although there’s still perspective that it’s hard to get money from the market. But it still ends up as the most preferred among the emerging markets,” Fitzgerald said.
Manila’s favorable ranking was attributed to the Philippines’ fast-growing economy, increasing popularity of the capital region for multinationals seeking outsourced services and growing awareness that transparency and governance issues have improved. Manila is also seen benefiting from a young demographics, strong capital inflows from overseas Filipinos and a workforce with cultural affinity with the West.
The research noted an increasing interest in emerging markets, in particular Indonesia and the Philippines, as alternatives to other traditionally more favored markets. “The reason? Cap rate compression continues to squeeze returns and with higher interest rates seemingly just around the corner, investors are drifting to markets and asset classes that can provide the kind of returns they are unable to tap elsewhere,” the report said.
Prime office rents were still well below the pre-global financial crisis rates but growing at 5-8 percent a year, the report said. Cap rates are between 9 and 10 percent. It noted a growing trend of office buildings being taken up ahead of completion.
The report noted that a lot of the recent action was focused on sub-markets like Fort Bonifacio, where vacancy rate was estimated at only 1 percent. Rents in this area were estimated to have risen from 50 percent of downtown Makati to 80 percent at present.
In investment prospects, Manila outranked Sydney (5th), Guangzhou (6th), Singapore (7th), Beijing (8th), Osaka (9th) and Shenzhen (10th).
As with other emerging markets, the report noted that Manila could be a hard place to invest, partly because of laws that prevent foreigners from majority ownership of land and also because there was plenty of domestic liquidity.